Weather Auction Hints at More Cable Consolidation

The basic cable network sector continues to consolidate, with the on-going Weather Channel auction tilting to Time Warner and a rival bid from NBC Universal, which follows the trend of insiders gobbling up what's available.

In other media sectors, particularly broadcasting, outsiders in the form of private equity firms are big players in mergers and acquisitions. But in cable networks, it's insiders like Cablevision's Rainbow Media, which bought the Sundance Channel earlier this month for $496 million in cash and stock. Rainbow already owns IFC, We TV and Fuse. In recent years, QVC, E!, Style, Speedvision, Bravo and Sci Fi all changed hands going to cable industry insiders.

With a second round of bidding winding down, The Weather Channel is expected to fetch $3-4 billion, according to the Wall Street Journal, though seller Landmark Communications is hoping for $5 billion.

Time Warner is considered a front runner because it can achieve synergies pairing The Weather Channel with CNN, and it will be flush with $9.25 billion in cash once its planned spinoff of Time Warner Cable is complete. NBC Universal is working with private equity outfit Blackstone Group on its offer. NBCU could achieve synergies of its own by linking The Weather Channel to its NBC Weather Plus service.

Other potential bidders are said to be CBS, which is buying Web outfit CNET for $1.8 billion; Liberty Media; and Comcast.

In a signal of strengthening in the credit the credit market—which has been in disarray due to the home mortgage meltdown—media conglomerate Clear Channel Communications said Thursday that it fully funded the debt component for its $17.9 billion sale to a private equity group. That debt financing settles a legal battle with banks. Banks participating in the Clear Channel deal funding are Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland and Wachovia.